Ex-Pimco chief out on bond after $25 million U.S. college entrance scam exposed

BOSTON/LOS ANGELES (Reuters) – Douglas Hodge, the former chief executive of the investment firm Pimco, appeared in federal court in Boston on Tuesday accused of taking part in a sprawling scheme in which wealthy parents paid for their children to cheat their way into elite U.S. colleges.

“Full House” actor Lori Loughlin, another of the 33 parents charged in the $25 million scam, was due to appear in a Los Angeles court later on Tuesday after being taken into custody earlier in the day.

Hodge said little during a brief court appearance beyond acknowledging that he understood the charges. A magistrate judge released him on $500,000 secured bond over the objections of a federal prosecutor who said Hodge’s wealth made him a flight risk.

The two are among 50 people charged for taking part in the largest such scam in U.S. history, which steered students into elite universities, including Yale, Georgetown and Stanford, by cheating the admissions process.

Another parent charged in the scheme, Manuel Henriquez, resigned as chief executive officer of the finance company Hercules Capital, the company said early on Wednesday.

And Gordon Caplan, who prosecutors say paid $75,000 last year to have some of his daughter’s wrong answers corrected on a college entrance exam, was placed on leave from his role as co-chairman of the international law firm Willkie Farr & Gallagher, the firm said on Wednesday.

The mastermind of the scheme, William “Rick” Singer, pleaded guilty on Tuesday to racketeering charges. Prosecutors in the U.S. attorney’s office in Boston say his company, Edge College & Career Network, made $25 million since embarking on the fraud in 2011, offering what he promised was a “guarantee” of admission.

Singer ended up cooperating with investigators last year, helping them secretly record incriminating conversations he had with parents.

The elaborate scheme involved bribing the administrators of college entrance tests to allow a child’s wrong answers to be corrected and bribing university athletic coaches to attest a child was a gifted athlete even if he or she was anything but.

In some cases, though not all, Singer ensured the child was oblivious to the cheating.

Media gathers outside the Edward R. Roybal Federal Building where defendants attend an initial hearing in a racketeering case involving the allegedly fraudulent admission of children to elite universities, in downtown Los Angeles, California, U.S., March 12, 2019. REUTERS/Mike Blake

“They feel good about themselves,” he told Caplan in a phone call, according to the criminal complaint. “And they just have no idea that they didn’t even get the score that they thought they got.”

In some instances, Singer helped doctor photographs to make a child appear athletic.

Parents made their payments to a sham charity that Singer ran, prosecutors said, which also allowed them to take a fraudulent tax write-off. The sham charity, the Key Worldwide Foundation, purported to help provide an education to “underprivileged students.”

It was unclear how many children benefited from the scheme and investigators said more parents and coaches may yet be charged. In telephone conversations intercepted by investigators, Singer brags of having helped hundreds of students, while in others he reassures parents that he has helped more than 20 or 30 other students cheat in recent years.

Loughlin is accused of paying Singer $500,000 to help cheat her daughters’ way into the University of Southern California (USC) by bribing an athletics official at the school to pretend the girls were gifted rowers. Her husband, the designer Mossimo Gianulli, is also charged with fraud, and appeared in court in Los Angeles on Tuesday before being released on $1 million bail.

One of the daughters, Olivia Gianulli, has become a prominent influencer on social media under the name “Olivia Jade.”

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“Officially a college student!” she captioned an Instagram photograph she posted in September, which showed her in her USC dorm room decorated with items she had ordered from online retailer Amazon.com, which paid her for the post.

Other prominent parents charged by the Boston U.S. attorney’s office include Felicity Huffman, the actor who starred in “Desperate Housewives”; and Bill McGlashan Jr., who headed a buyout investment arm of private equity firm TPG Capital, which put him on indefinite leave after he was charged.

Representatives of accused parents either declined to comment or did not respond to inquiries. Several of the coaches accused of accepting bribes have been fired, placed on leave or have resigned.